Tuesday, March 27, 2012

More on Matador

Matador Resources completed its initial public offering earlier this year and is starting to make the rounds to investor conferences.  Since it was privately held, many people don't know much about the company's operations, so here's a little primer on the company with a focus on its activities around the Haynesville Shale.

Matador is based in Dallas and all of its operating acreage is in Texas or immediately adjacent.  The company's main focus is the Eagle Ford Shale area, where it has 52,053 gross acres (28,906 net), and East Texas/North Louisiana, where it has 29,128 gross acres (25,477 net).  As one would expect in this low natural gas price environment, Matador is focusing most of its resources (86% of its capital expenditures) on the liquidy Eagle Ford right now.

In ETX/NLA, 14,705 of Matador's 29,128 gross acres are prospective for the Haynesville Shale, of which around 12,000 gross acres (5,500 net) are in the Tier 1 core area (map below). By my count, Matador has completed eight wells as operator, five in Caddo Parish (Caddo Pine Island field - not in "Tier 1" area) and two in Red River Parish (Thorn Lake field) and one in DeSoto Parish (Red River-Bull Bayou field).

Most of the company's Haynesville activity has been as a working interest participant with operators including Petrohawk, J-W Operating, QEP Resources, SWEPI (Shell), Encana and Samson Contour. The company reports that more than 90% of its acreage in the region is held by production.  Matador last operated a Haynesville well in February 2011 and never ran more than one at a time.

In north Louisiana, Matador's biggest concentration is in the Cotton Valley and Hosston formations in the Elm Grove area of southern Caddo Parish, where it has 10,000 net acres.

In 2012, Matador expects to participate in 25 gross wells (1.5 net) in the Haynesville Shale with a total capex of $13.5 million, which represents just 4.3% of the company's capital budget.  With that budget, I don't expect that Matador will be operating any of these wells.  As with most other companies, we shouldn't expect to see much about Matador in the Haynesville Shale until natural gas prices pick up, and even then the company will be a minor player.

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